In the second half of 2024, the economic situation remains far from optimistic. Whether it's consumption, foreign trade exports, or infrastructure investment, all are in a slow recovery. Along with our industrial structure transformation, this is an inevitable 'climbing over hurdles,' but it also means we will face a considerable 'period of low economic growth.' During this cycle, we will feel uncomfortable; many enterprises face ineffective involution, with both revenue and profits declining, and some even suffer continuous losses, falling into difficulties. So, how do we navigate this inevitably prolonged period of low economic growth, survive, and achieve sustainable profit growth? History can tell us of rise and fall; looking at neighbors can guide our actions. Let's turn our gaze eastward—our neighbor Japan has experienced a similar economic cycle. Starting with the burst of the economic bubble in 1990, Japanese society entered a thirty-year period of low economic growth. During these three decades, Japan faced issues such as an aging population, declining birthrates, rural hollowing out, manufacturing outflow, social stratification, weak consumer sentiment, and low corporate investment confidence. Yet, it was precisely during these thirty years that Japan produced many outstanding companies, and the one we're discussing today is among them. It is known as Japan's most profitable store, the only company among all 3,000 listed companies in Japan to achieve 34 consecutive years of growth—no other, only one. With annual customer traffic exceeding 300 million, over 700 stores globally, and consolidated sales of over 2 trillion yen (approximately 936.78 billion RMB) in fiscal year 2024 (ending June 2024), it is equivalent to twice Walmart China's 2023 sales and 20 times the 4.6 billion RMB sales of regional retailer Pangdonglai in 2023. Don Quijote is now Japan's fourth-largest retail brand, behind only 7-Eleven, Aeon, and Uniqlo. From a 'thieves' market' to a 'retail monster,' what exactly did Japan's discount king Don Quijote do right? The Origin of Don Quijote: Super Value for Money It originated in 1978, with its predecessor being a store called 'Thieves' Market,' founded by Takao Yasuda. Why was it called 'Thieves' Market'? Because it was cheap—shockingly cheap, as if the items were stolen. Why so cheap? As early as 1974, during the oil crisis, Yasuda had an idea: since many companies were going bankrupt and clearing out surplus stock, and society was experiencing consumption downgrading, but the market only had department stores, GMS, category killers, and other formats, and these formats couldn't offer particularly low prices, could I acquire these surplus goods at extremely low prices and sell them at low prices? This was the initial motivation behind his founding of 'Thieves' Market' and later Don Quijote. It was like a scavenger in the economic ruins, turning surplus goods from bankrupt companies and factories into affordable products for consumers. These goods, though not perfect, had genuine quality and irresistible low prices. Inside the Thieves' Market, products were abundant but prices were astonishing, from brand-name surplus to daily groceries, all labeled 'super cheap.' After the success of 'Thieves' Market,' the first Don Quijote store officially opened in 1989. This timing could be described as 'born at the wrong time,' as it coincided with Japan's 'lost three decades.' However, Japan's lost three decades were precisely the three decades of Don Quijote's takeoff. While many companies struggled due to the economic downturn, Don Quijote achieved steady growth for over thirty consecutive years. Over time, Don Quijote continued to evolve, moving from a single format to diversification. It not only retained its original surplus discount feature but also continuously expanded its product lines, from daily necessities to high-end luxury goods, from home appliances to snacks—everything was available. Today, its global strategy has given Don Quijote even more momentum. From Asia to the Americas, from Singapore to Hawaii, and to China's Hong Kong, Macao, and Taiwan, with over 700 stores, it has become a new favorite for global shoppers. Especially against the backdrop of Japan's tourism revival, Don Quijote, with its unique charm, has become a must-visit spot for overseas tourists, opening new growth space for performance. Under the macro trend of Japan's 'lost three decades,' Don Quijote not only did not decline but took off against the trend, achieving long-term steady growth. Don Quijote's 'Killer Move': Turning Waste into Treasure Don Quijote's business model cleverly integrates three elements: convenience, discount, and fun, making it unique in the retail industry. First is convenience. Amid the wave of economic recession, Don Quijote took over vacant stores at low cost and, through careful design and dense displays, transformed old spaces into attractive shopping paradises. Its store location strategy is also highly strategic, often in city centers or near subway stations, ensuring high foot traffic and ultimate convenience. Capturing the late-night consumer segment is also a key part of Don Quijote's innovative strategy. By extending business hours, it locked onto those consumer groups active at night, such as single young people, couples, and white-collar workers just off work. The loud oldies and rock music played in stores constantly stir emotions. As Yasuda said, the non-daily and free atmosphere at night is more likely to stimulate consumption desire, and music is the best medium for releasing that sense of freedom. Don Quijote secured its consumer base through the late-night economy: most stores see 30% to 40% of sales after 8 PM, and many city stores are open 24 hours, such as the first store in Taipei. Second is discount. Don Quijote specializes in selling surplus goods, clearance items, and some regular-priced goods at discounted prices, offering consumers low-priced products. Through large-scale purchasing and close cooperation with suppliers, it reduces procurement costs, thereby passing on price advantages to consumers, allowing them to buy needed goods at lower prices. So, how does Don Quijote compress operating costs to the extreme? Yasuda did three things. First, he expanded the scale of his upstream supply chain, and conveniently, after the bubble economy, many companies went bankrupt, giving him more surplus goods to collect. Yasuda devised a set of methods: first, he tilted resources toward high-quality suppliers, paying all invoices in cash with payment terms of no more than three days! This meant Don Quijote faced extremely high capital turnover pressure, but it also had an advantage: getting ahead of competitors to secure the best quality goods in the industry. At the same time, Don Quijote continuously enriched its product matrix. Surplus goods had high gross margins, accounting for 40% of products. Regular and hit products accounted for 60%, but he sold them at 10% off market prices. These two points combined—one maximizing gross profit, the other maximizing customer traffic—ultimately achieved overall profitability. For example, Don Quijote emphasizes discounted products in store displays to create a 'whole store low price' feeling. This display method is still used today; for instance, you can see Don Quijote displaying large quantities of private-label coffee at 198 yen per pack, with a small amount of other brand coffee priced several times higher placed nearby. In comparison, consumers are more likely to choose the private-label coffee, which is also a special product with a gross margin as high as 40%. Moreover, Don Quijote emphasizes discounted products in displays, with out-of-season items getting 30-40% off. Additionally, Don Quijote stores have significant autonomy in product sales. In each store's sales composition, nearly 40% comes from products purchased autonomously by each store, with the rest contributed by headquarters-purchased products. With full decision-making power, many Don Quijote stores have products better adapted to local conditions, thus gaining favor from locals. Second, Yasuda delegated management authority, setting up a 'personal store manager' system where frontline staff decide everything from purchasing, marketing, and inventory management, including the entire PDCA process, while also introducing a 'staff battle' system to motivate frontline employees. This way, employees treat the store as their own business, making more flexible product combinations and arrangements, such as considering local realities more in the combination of surplus hits and low-priced goods, and being hands-on. So, even with significant discounts, Don Quijote's profit margins remain very high. Yasuda believed that the core of store management lies in 'wisdom on the ground.' Before he chose to delegate authority, there was no precedent in Japan's retail industry; both convenience store chains and large general supermarkets had headquarters set unified standards for daily store management. But Don Quijote chose to do the opposite. Yasuda believed this would allow more flexible adaptation to local customer needs. The third thing is developing private brands to fill gaps, similar to Uniqlo's approach to private-label products. In 2009, Don Quijote officially developed its private brands, and by 2022, its domestic private brand sales accounted for 15.3% of total sales, covering over 1,200 products. It established an approval committee responsible for collecting customer needs from stores, then passing them to the product development department, with Chinese OEMs and brand owners handling production, and finally distributing products to stores through its own logistics. Data shows that private brands contribute 11% of revenue and 16% of gross profit, making this strategy very correct. In Don Quijote's 'evolution' process, its core capability is 'turning waste into treasure'—selling surplus goods, acquiring poorly managed commercial real estate, and merging bankrupt companies, ultimately turning them into treasures. Finally, there's entertainment. This is reflected in the 'cluttered' product displays, consumers' treasure-hunting psychology, and the atmosphere created by music. Customers entering a Don Quijote store for the first time might be startled. The entire store is packed with dense items, stacked haphazardly, with POP posters everywhere, prices written in oversized fonts. Shelves almost reach the ceiling, with no blank space in sight—only products and hand-drawn posters, and every corner shelf is hung with items from top to bottom. The shopping experience isn't particularly comfortable—because aisles are narrow, you have to carry a handbasket (rather than pushing a cart) throughout, and sometimes you have to climb stairs with your load, as not all stores have elevators. However, this is exactly the secret to Don Quijote's appeal, attracting customers to 'explore and hunt for treasure.' Yasuda, in 2003, said: The demand of nighttime economy consumers is not purposeful repurchase, but seeking stimulation and freshness through treasure-hunting experiences. By creating such a space, we ensure that every visit offers a different sense of novelty. Gradually, consumers come to see us as a channel where they can discover new things; items available this time may not be there next time. This means: It's normal not to find what you want. It's like an adventure, part of the fun. Here's the interesting part: when you walk into a Don Quijote, a small store 'compressed-displays' tens of thousands of products. You explore to your heart's content. You never know what treasures you'll uncover today. Don Quijote holds an annual 'Display Ironman' competition, with only one event: who can pack more goods onto a shelf. Once, an employee violated rules by placing discounted items in the back rows. Furious, Yasuda gathered all staff and lit a 10,000-yen bill on the spot: 'Am I not absurd? But you're even more absurd! I only lost 10,000 yen, but your actions could cost you hundreds of thousands!' He also paired discounted products with the most flamboyant copy. Yasuda set up a professional department in each store responsible for drawing marketing posters for cheap goods, with varied copy, but the core was always about cheapness: 'Absolute low price, overwhelming competitors!' 'If it's a yen more expensive, we refund!' Yasuda said: 'Retail is not about making a sales floor, but a buying floor; posters are our love letters to customers.' It is this persistent pursuit of 'fun' that allowed Don Quijote to stand out in adversity, touching the deep needs of consumers. Behind this strategy is Don Quijote's profound insight into consumer psychology: in a sea of abundant products, people tend to make emotional choices, enjoying the fun of unplanned shopping rather than rational decision analysis. During the 'lost three decades,' Japan's asset bubble burst, stock and real estate markets both suffered, the real economy struggled, and people's incomes fell significantly. In such an environment, people's spiritual world was also severely damaged, urgently needing an outlet to release stress and alleviate negative emotions. At this time, Don Quijote was not just a place offering low-priced goods, but also a spiritual haven where people could temporarily forget worries and release pressure—'even if your wallet is thin, you can find happiness here.' Don Quijote seized the structural changes in Japan's stock competition, such as shortened product life cycles, the rise of convenience store channels, and the explosion of new products, and tapped into a unique consumer segment through the nighttime economy and treasure-hunting experiences. Behind this, it deeply bound with surplus goods suppliers, delegated purchasing authority to stores, allowing each store to achieve the 'lowest price' and 'best product mix' in its respective trade area, realizing the company's unique value: CVD+A, where CV=convenience, D=discount, and A=Amusement. Rather than calling Don Quijote a discount store, it's more accurate to call it a department store that succeeds through clever sales methods. Don Quijote's business model is naturally anti-cyclical: in good economic times, it may perform averagely, but in bad times, it can thrive exceptionally. What inspiration does Don Quijote offer for Chinese businesses? Compared to many high-profit industries, Don Quijote chose a business model of extreme low prices and high cost-performance. This path is tough but has natural anti-cyclical properties. During economic booms, Don Quijote may perform modestly, but during downturns, it demonstrates strong vitality. Especially in our current economic situation, Don Quijote's counter-trend growth provides valuable lessons worth studying and reflecting on. First, 'total cost leadership' through all-employee participation in management. Low prices aren't impressive; anyone can sell at a loss. What's truly impressive is maintaining a reasonable profit margin while offering extreme low prices. From Don Quijote's story, it's clear that it broke the mold of uniform decoration and centralized distribution in chain retail, allowing employees to actively participate in management and delegating product purchasing and pricing authority to stores. It also linked store employee salaries to sales, gross profit, and inventory turnover, greatly motivating employees and enhancing profit margins. We should consider: Do we fully trust our frontline employees and give them sufficient empowerment? Do we clearly understand all our cost items and compress them to the extreme? During periods of low economic growth, we can no longer live extravagantly but must be frugal and meticulous. Our customers are the same; they not only like cheap goods but prefer cheap and better goods. Perhaps only by compressing costs to the extreme, making it impossible for competitors to sell at our prices even at a loss, can we survive the brutal involution battlefield. Second, the 'customer-first principle' of symbiosis with customers. Customer-first is not just a formal service process but an art of seeing things from the customer's perspective and genuinely caring about their needs. We can think: Do we treat 'customer needs' as documents on the desk and slogans in our mouths, or do we seriously think and investigate? Do we set aside our fixed views of our brand and products, put ourselves in the customer's shoes, experience everything comprehensively, and then consider if there's room for improvement? Do we take the customer needs we've researched and, through deep thought and insight, turn them into actionable improvement points? Are we willing to sacrifice our own convenience and some profit to continuously improve customer convenience and experience? Third, adapt to the low-growth era and go with the flow. Don't rush into 'involution'; first, take time to observe. Observe what? See clearly this era, its major variables and small opportunities. Start running after seeing the direction clearly; even if you can't win quickly, at least you won't lose badly. Times change, and different times bring different needs and opportunities. With an old map, you're destined not to find new continents. In a low-growth economy, with no demographic dividend or high-speed growth dividend, we must learn to adapt from an incremental era to a stock era, or even a 'shrinking era.' This requires more hard work and real effort to survive and thrive.